LIFE NEW BUSINESS Tips from Your Replacements Team OVERVIEW State Replacement Regulations protect agents and policyholders from improper replacements. Follow these simple tips to: 4 Ensure you comply with State Regulations 4 Ensure timely processing of your life application when soliciting business from clients who have existing coverage BE PREPARED Every state shares one important requirement: if Replacement forms are required, they must be signed and dated prior to, or at the same time, as the application. This ensures that the client is fully aware of the definition of a replacement transaction and prompts them to consider all possible repercussions. Make sure you take these forms as part of your application kit, whether or not you believe a replacement will be involved. Failure to comply may hold up the case until a newly signed application is provided. Make sure you always have the latest version of all applications and forms by using our application kitting program at JHSalesNet.com or by using the other forms' vendors John Hancock supports. EXISTING LIFE INSURANCE Questions 26a and 26b on the Application for Life Insurance must be answered. John Hancock considers any policy being lapsed or terminated six months prior to, and 12 months after issuing the new policy, to be a replacement, and the proper replacement paperwork is required. 26. EXISTING LIFE INSURANCE YES NO A. Does the Policy Owner have any existing life insurance and/or annuities with this or any other company? If Yes, refer to the Instructions for Application for Individual Life Insurance regarding additional required Replacement forms B. Will this insurance replace any existing life insurance policies and/or annuities, or are you, the Policy Owner, considering using funds from existing policies or annuities to pay premiums on the new policy? If Yes, refer to the Instructions for Application for Individual Life Insurance regarding additional required Replacement forms Please note that for states that follow the National Association of Insurance Commissioners (NAIC) replacement model, replacement forms are required if the owner has existing insurance, even if that insurance will not be replaced by the proposed policy. As a rule of thumb, in a NAIC Replacement Model state, if the answer to either question is Yes, then the replacement form will be required. LIFE-5564 11/16 Page 1 of 6. Not valid without both pages.
NAIC REPLACEMENT MODEL STATES Alabama Alaska Arizona Arkansas Colorado Connecticut Iowa Kentucky Louisiana Maine Maryland Mississippi Montana Nebraska New Hampshire New Jersey New Mexico North Carolina Ohio Oregon Hawaii Rhode Island South Carolina South Dakota Texas Utah Vermont Virginia West Virginia Wisconsin Question 32a on the Application for Life Insurance must also be completed. If answered Yes, please also answer question 32b. 32. YES NO A. Is the Proposed Insured under this application also an insured on any other existing life insurance policy, including any policy that has been sold, assigned, transferred or settled? If you checked Yes, complete Question 32B B. If Yes, provide details for each existing Life Insurance policy on the Proposed Insured with all companies. INSURANCE COMPANY INSURANCE PURPOSE YEAR SURVIVORSHIP TO BE REPLACED 1035 EXCHANGE SOLD, ASSIGNED TRANSFERRED OR SETTLED PERSONAL BUSINESS ISSUED YES NO YES NO YES NO YES YEAR FACE AMOUNT INCLUDING RIDERS $ $ Note: If more than two policies are inforce on the insured, you may submit multiple pages, or include that information in Section K of the application. If you attach a separate schedule of coverage, please have the owner initial and current date that page. Page 2 of 6. Not valid without both pages.
STATE-SPECIFIC FORM REQUIREMENTS Refer to the following chart for states that require forms that differ from the standard replacement form or have forms in addition to the standard replacement form. STATE Arkansas Florida Michigan Minnesota Nevada New York Rhode Island Washington Wyoming REPLACEMENT REQUIREMENTS Life Insurance and Annuities Replacement Disclosure (NB5135AR) and Important Notice: Replacement of Life Insurance or Annuities (NB5011US) Notice to Applicant Regarding Replacement of Life Insurance Florida (NB5042FL) Notice To Applicants Regarding Replacement of Life Insurance Michigan (NB5177MI) (please note that both pages of this form must be signed. Please be sure to also complete the included Important Notice: Replacement of Life Insurance or Annuities form (NB5017US)) Important Notice: Replacement of Life Insurance or Annuities (NB5210MN) Important Notice Regarding the Replacement of Your Policy of Life Insurance (NB5194NV) and Important Notice: Replacement of Life Insurance or Annuities (NB5017NV) Please refer to our Doing Business in New York the Regulations 60 Way flyer for details regarding New York Replacements. For Internal Replacements: Important Notice Regarding Replacement of Life Insurance Rhode Island (NB5198RI) and Important Notice: Replacement of Life Insurance or Annuities (NB5011US) For External Replacements: Important Notice: Replacement of Life Insurance or Annuities (NB5011US) Important Notice Regarding Replacement of Life Insurance Washington (NB5046WA) Replacement Notice Wyoming Existing Insurance Which May Be Replaced or Changed (NB5201WY) Community Property States For external replacements taking place in a community property state, the spouse must sign the External 1035 Exchange Absolute Assignment/Beneficiary Change (NB5035) form in the signature section. For your convenience, here is a list of community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Page 3 of 6. Not valid without both pages.
COMPLETE REPLACEMENT FORMS IN FULL Cases may be delayed due to missing information on replacement paperwork. To avoid delays in processing replacement cases, ensure all fields are completed. These are some of the most common areas for potential delays: Replacement Statement: Check Boxes Please check the boxes indicating the type of existing coverage. Agent s Statement Be sure to complete the Agent s Statement portion of the Replacement form. (Note: For non-replacement cases where the Replacement form is required, enter the text Not a Replacement on this line.) Please also note: The Owner line (on all Replacement forms, including Confirmation of Marketing Materials (NB5012) and 1035 Exchange forms) Complete the owner s name in full, including the date of the Trust (when applicable) In some situations, the owner and the proposed insured are the same person this does not mean the line should be left blank. Either enter the name on both lines, or write same on the owner line to indicate this Confirmation of Marketing Materials If your transaction is being conducted in a NAIC state and a Replacement is taking place, the Confirmation of Marketing Materials (NB5012) form is required. 1035 Exchanges If a 1035 exchange is being completed with multiple carriers, a separate External 1035 Exchange Absolute Assignment/Beneficiary Change (NB5035) form is needed for each external carrier. SIGN ON THE DOTTED LINE For Replacement and 1035 exchange forms, the proper signature(s) must be provided: Each form requires an original signature. Copying a signature from a previous form is non-compliant, and; a new form will be required if an original signature is not included Names of signers should be printed next to the signature when indicated All signatures should be current dated by the signer on the day they are signed, even if a new Replacementrelated form is requested after the submission of the application. To comply with the NAIC date requirement, the application should also be re-signed and dated at that time or a newly signed application should be provided In the case of a trustee or officer signing on behalf of a trust or corporation, or similar circumstance, the signer should indicate their title next to their signature If the policy is corporate owned, the external carrier may require a corporate resolution at the time of the exchange If any changes are made to a form after it has been signed, those changes must be initialed and current dated by the original signer(s) to show that they are authorizing the change to the original If the policy has a collateral assignment, the Assignee's authorization is also required. Please contact your Replacement Representative for further information. Page 5 of 6. Not valid without both pages.
1035 EXCHANGE CONFIRMATION PROCESS The following criteria must be met before John Hancock will initiate a 1035 exchange: A final underwriting offer has been made once the final proposal/illustration has been reviewed All pre-issue requirements have been received and are in good order Confirmation that the client has accepted the final underwriting offer and their intent to proceed with the 1035 exchange. (Note: the replaced carrier may not reinstate the coverage if the client changes his/her mind. This can result in a loss of coverage and significant tax consequences) Once these requirements have been completed, we can then initiate the request to begin the exchange. Please note that some carriers have their own forms that clients will need to complete in addition to John Hancock s replacement forms. Some of these carriers are: MassMutual, RiverSource, Northwestern Mutual, Principal Financial Group, Knights of Columbus, Mutual Trust Financial Group, and Ohio National. This list of companies is subject to change without notice. PARTIAL 1035 EXCHANGES Please note that John Hancock does not allow partial 1035 exchanges where only a portion of the 1035 funds are carried over, and the existing policy remains in force. EXISTING LOANS In most situations, it is possible to carry an existing loan to a new policy as part of a 1035 exchange. Failure to do so or to pay off the loan in full prior to the exchange may result in significant tax consequences. If a loan is extinguished as part of the 1035 exchange and the existing policy is in a gain position, the taxable amount is generally equal to the lesser of the loan amount or the gain in the policy. ENSURE LIKE TO LIKE 1035 EXCHANGES In order to qualify under the Internal Revenue Code (IRC) sec. 1035 as a tax-free exchange with John Hancock Life, the replaced coverage must be life insurance and the ownership and insured party(ies) must be identical on the existing and proposed policies. Save time up front by verifying ownership, including any liens or assignments. If a change of ownership or change of name is to occur on the existing coverage to make it comply with this rule, the 1035 exchange form should not be signed and dated until after the change has taken effect on the replaced policy. EXISTING COVERAGE If the existing coverage being replaced is not to be 1035 exchanged as part of the replacement, it is the responsibility of the client and producer to lapse, surrender, or otherwise cancel the existing policy. This is the case whether the coverage is held with John Hancock or another carrier. (Note: This will mean suspending the draft on policies that are set up with Pre-Authorized Payment Plan option.) STALE DATES Each external carrier has a "stale date" when external 1035 exchange forms will no longer be valid. Please check with the carrier or your Replacement Representative to confirm this date. Page 4 of 5. Not valid without both pages.
For more detailed information on how to handle replacements, please visit JH SalesNet for the following pieces (click on the New Business/Underwriting tab, and then New Business Guidelines ) Internal Replacements Guidelines New York Replacements Guidelines Doing Business in New York the Regulation 60 Way Processing a 1035 Exchange For standard Replacement questions on your life insurance case, please contact your Life New Business Case Manager by calling 1-800-505-9427. If there is an escalation regarding a Replacement case, you may contact a member of the Replacements Management Team: Scott Delaney, Director, New Business Operations 617-572-5130 SDelaney@jhancock.com Paul Pacheco, Manager, New Business Operations 617-572-9527 PPacheco@jhancock.com For Agent Use Only. This material may not be used with the public. Insurance products are issued by: John Hancock Life Insurance Company (U.S.A.), Boston, MA 02210 (not licensed in New York) and John Hancock Life Insurance Company of New York, Valhalla, NY 10595. MLINY120916047 Page 6 of 6. Not valid without both pages.